The board of the south-west Victorian dairy processor has backed a bid of $8 per share from Canadian dairy company Saputo.

Senator Xenophon says the current foreign investment laws are vague and there is not a properly defined national interest test.

He says the Federal Government should look closely at New Zealand's laws, which are much stronger.

"Our foreign investment rules in this country area joke, they are so vague, so ambiguous as to be useless," he said.

"We need to look at what the New Zealanders have been doing for a number of years now effectively, it doesn't stop foreign investment, but it sets out the rules much more clearly, there is a much better definition of the national interest test."

Mr Xenophon is concerned a Saputo takeover could lead to job losses.

"The government, the Treasurer, needs to look very carefully at the potential job impact, what it means in terms of local ownership and control, in terms of big decisions being made in terms of plant, equipment and product lines," he said.

"To lose that, to an overseas company, is a real worry."

The WCB board's recommendation for the Saputo takeover came amid rival bids from the cheese maker Bega, and the producer-owned dairy cooperative Murray Goulburn.

WCB's share price has fallen by 2.1 per cent today, at and 12:40pm (AEST) was trading at $8.24.